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An Assessment of E-business Strategies Using the Strategic Alignment Model

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AN ASSESSMENT OF E-BUSINESS STRATEGIES USING THE

STRATEGIC ALIGNMENT MODEL

Rival, Yann, CREPA, Paris Dauphine University, France.

Yann.rival@dauphine.fr

Abstract

Most research concerning e-business offers a methodology, measures the predisposition of the firm or evaluates the consequences in terms of management. Few authors attempted to develop specific constructs and models for analyzing and evaluating e-business. This is why this paper aims at designing a model for assessing e-business strategies based on the strategic alignment perspective. Using the Information Systems (IS) literature about alignment and data collected from 11 interviews of general and e-business managers from the main companies of the French tourism sector, 12 variables were identified. These, in turn, can be used to build an e-business alignment model for the enterprise. Using this model, firms which have been developing an internet-related strategy over the past few years can assess their own decisions and actions concerning the Internet and are able to compare them to their competitors’.We decided to apply this investigation to a sector where firms did a lot in e-business: tourism.

Keywords: E-business, strategy, Information Technologies (IT), Information Systems (IS), alignment, model, Internet, tourism

INTRODUCTION

Criticized and even put into question, after the 2000 “e-crack”, e-business is present today, more than ever, in the activity of the firms.

If we only take a look at the B to C revenue of 2003, Europe raised 29.81 billion euros and the U.S.

raised around 552 billion dollars with annual increase rates reaching up to 50%, depending on sectors.

Authors often give diverging definitions of the term “e-business”. What we propose here is a simple definition: the integration of Internet technologies within the firm, especially in order to present

and sell products and services through a website.

This paper first describes the main trends in e-business research and then presents the Henderson and Venkatraman strategic alignment model (1993).

Finally, from the strategic alignment perspective, this research proposes an assessment model for Internet strategies: an e-business alignment model.

1. DIFFERENT RESEARCH APPROACHES ABOUT E-BUSINESS

1.1 Three main trends

E-business succeeded to become a strategic reality in the heart of the firms business and was the

subjectof different research. We can distinguish three main trends in e-business research (Table 1).

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The first trend presents a methodology for integrating Internet within the organization: how to do

e-business?

This trend consists in suggesting the right solution to successfully build an e-business strategy (Venkatraman, 2000; Kulatilaka et al., 2001).

Secondly, authors propose models measuring the predisposition of the firm for electronic commerce (Pillet et al., 2002), identify key factors for developing e-commerce (Ang et al., 2001; Raymond et al., 2002) or Internet (Limayem et al., 1999), in the organization. Others, finally, investigate the IT core

capabilities (Van Der Heijden, 2001) or IT infrastructure capabilities (Vitale et al., 2002) needed to

develop e-business.

The second trend studies Internet technologies and the developmental impact on the management of the firm: how to manage e-business?

It is necessary to take into account this impact on the organization of the firm (Kalika, 2000), the IS direction (Earl et al., 2001; Ross et al., 2002) and the firm’s performance (Monod, 2002).

Finally, the third trend builds a specific framework to analyze e-business: how to analyze e-business? Some research aims at updating strategic management tools like the Value Chain (Porter, 2001; Rayport et al., 1995), The Industry Structure analysis (Porter, 2001) or even classical portfolio strategy maps (Tjan, 2001).

This research trend also attempts to evaluate the quality of a web site (Palmer, 2002) or the Internet consumer satisfaction (Devaraj et al., 2002; Mc Kinney et al., 2002). Finally, this trend presents assessment models and theories for the e-commerce activity of the firm (Nickerson, 2002; Wheeler, 2002).

Trend Question

Methodology How to do e-business? Managerial impact How to manage

e-business? Analysis How to analyze

e-business?

Table 1- Main trends in e-business research

1.2 Methodology

In an exploratory approach, 11 interviews were made between June 2002 and October 2003 with general and e-business managers from the main companies of the French tourism sector. The semi-structured interviews focused on different subjects: Internet impact in the tourism sector, description

of the e-business project of the firm, relations between e-business managers and general managers, current results of the e-business activity and objectives for the next years.

All the interviews were recorded (10 hours), transcribed (88 pages) and analyzed using a thematic categorization.

1.3 A real need

Concerning e-business, managers have learned more on their own through experimentation than through research (Malone, 2001). Moreover, the 11 interviews indicate a real need. Indeed, firms which have been developing an internet-related strategy over the past few years now need to assess

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their achievements. Today, it is necessary for them to stand back in order to assess their own decisions and actions concerning the Internet and to be able to compare them to their competitors’.

This is why we propose an assessment model of e-business strategies in agreement with the trend of research aiming at designing a framework for the analysis of e-business.

2. THE STRATEGIC ALIGNMENT MODEL AS A FRAMEWORK FOR ANALYSIS

2.1 Presentation

The e-business strategies model proposed in this research is based on 1993’s Henderson and

Venkatraman work.

It suggests that strategy and IT developments must be coherent. The strategic alignment

between business strategy and IT strategy is derived from two main relations:

- The strategic fit between the external and internal scopes of the firm

- The functional integration of IT within the enterprise

These links are drawn between four elements: Business Strategy, Business Infrastructure and

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Figure1- Strategic Alignment Model, adapted from Henderson and Venkatraman, 1993

This innovative model goes further than the traditional linkage between business activity and

IT by dividing IT functions into two elements, operating a distinction between IT strategy and

IT infrastructure and process.

The most important objective for managers is not to reach alignment but to find the alignment

perspective that best corresponds to the firm.

What strategic alignment aims at goes beyond partial fit. It is an attempt at simultaneously

taking into account the complex relationships between strategies, structure and technology.

2.2 Use

Strategic alignment model for IS/IT can be applied to Internet technologies. If we consider

e-business strategy as emerging from Internet technologies, the Henderson and Venkatraman

model would enable us to assess the congruence of the e-business strategy with the rest of the

firm. Today, however, there are very few, if any, studies that apply the strategic alignment

model to the e-business activity of the firm.

Finally, today, as the potential or competitive advantages deriving from IT in the new

economy have become crucial, the development of e-business puts forth the use of IT and

brings into the foreground the strategic alignment concept.

Business Strategy IT Strategy

Business Infrastructure and Processes IT Infrastructure and Processes Strategic Fit Strategic Fit Functional Integration Functional Integration Cross-Dimension Alignments Key

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3. AN E-BUSINESS ALIGNMENT MODEL

3.1 Construction

The model is divided into 4 levels connected to 3 main relations (Figure2).

We define e-business alignment as the fit between the E-business Strategy of the firm (elaboration and application processes of the e-business strategy) on the one hand, and the Business Strategy (elaboration and application processes of the business strategy), the organization of the firm (structures and organizational processes), and the E-business structure (technological infrastructure and processes) on the other hand.

Put together, strategic business alignment, organizational business alignment and technological e-business alignment constitute what we call the e-e-business alignment of the firm.

Figure 2 – Proposition for the representation of E-business Alignment.

Strategic E-business Alignment Organizational E-business Alignment Technological E-business Alignment

Fit E-business Strategy E-business Alignment Business Strategy Organization E-business Structure Key

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3.2 Variables

From the IS literature describing factors that inhibit or facilitate alignment, and the data collected in the 11 interviews conducted between June 2002 and October 2003 with general and e-business managers of the main companies of the French tourism sector, 12 variables were identified and adapted to the e-business activity (Table2). We can then with these variables characterize the different relations within the e-business alignment representation and obtain an e-business alignment model proposition (Figure 3).

Relations Variables Meaning References

Communication between managers

Regular exchange of information between managers during the elaboration and application of strategies

Lind and Zmud, 1991; Reich and Benbasat, 2000; Van Der Zee and De Jong, 1999

Collaborative planning methods

Planning process including the activity

Broadbent and Weill, 1993; Reich and Benbasat, 2000; Lederer and Burky, 1989; Zmud, 1988 Valorization Consideration of the

activity by other functions of the firms

Amabile and Gadille, 2002; Ciborra, 1997; Reich and Benbasat, 1996; Interviews

Strategic E-business Alignment

Implication in the strategy Implication of the activity in the strategy

Broadbent and Weill 1993; Interviews

Organizational change choice

Choice of adapting the organizational structure of the firm to the activity

Amami and Rowe, 2000; Interviews

Resources shared Sharing of resources in the establishment of working methods

Ives, Jarvenpaa and Mason, 1993 New processes Creation of new processes

for the activity in the firm

Broadbent and Weill, 1993 Functional integration Level of integration of

Internet-based technologies within the different departments of the firm

Amabile and Gadille, 2002; Interviews Organizational E-business

Alignment

Relationship Inter-functional

relationships: existence of inter-functional teams and exchanges between functional managers.

Broadbent and Weill, 1993; Boynton, Zmud, and Jacobs, 1994; Clark and Fujimoto, 1987; Luftman, 1997; Rockart, Earl and Roos, 1996; Interviews Complementarity Complementarity in

technological investments

Amabile and Gadille, 2002; Henderson and Venkatraman, 1993 Development Development of a new technological architecture Henderson and Venkatraman, 1993; Interviews Technological E-business Alignment

Technological integration Integration of existing technological resources

Rockart, Earl and Roos, 1996; Interviews

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Figure 3- E-business Alignment Model proposition

3.3 Research prospects

The Alignment trend has been much criticized because of the weakness of its empirical results. It is true that measuring alignment in practice is a rather difficult exercise.

Instead of statistical approaches based on co-variation, which have showed their limits, we

decided to build an instrument to measure alignment with factual indicators of the fit. To do

so we are adapting scales measure of alignment described in the IS literature, to the e-business

activity, to establish a questionnaire that will be sent to the e-business or general managers of

companies from the French tourism sector.

Then the validity and reliability of the model could be tested.

We decided to apply this investigation to a sector where firms did a lot in e-business: tourism. Tourist products and services essentially contain information and are perfectly adapted to the Internet. This is why tourism represents one of the first sectors on the web. For instance, in the US tourism market,

around 203 % of transactions were made on the Internet in 2003. The same year, in Europe, 274 % of

travelers used the Internet to find information or make a reservation.

Strategic E-business Alignment Organizational E-business Alignment Technological E-business Alignment

Communication between managers

E-business Alignment

Collaborative planning methods

Valorization

Implication in the strategy

Organizational change choice

Resources shared New processes Functional integration Relationship Complementarity Development Technological integration

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References

Amabile S. and Gadille M. 2002. ‘La valorisation des usages d’Internet et de sites Web par l’alignement stratégique: une caractéristique de l’entreprise étendue?’. Proceedings of the Seventh AIM Conference, Hammamet, Tunisia.

Amami M. and Rowe F. 2000. ‘Les opportunités de recherche en commerce électronique sur Internet’.

Proceedings of the Fifth AIM Conference, Montpellier, France.

Ang J.S.K; Dhaliwal J.S; Hyde M; Ranganathan C. and Teo T.S.H. (2001). ‘Facilitators and Inhibitors for deploying business-to-business e-commerce application: a multi-method, cross-cultural study’. Proceedings

of the Twenty-Second International Conference on Information Systems, New Orleans, Louisiana.

Boynton A.C; Zmud R.W. and Jacobs G.C. 1994. ‘The Influence of IT Management Practice on IT Use in Large Organizations’. MIS Quarterly, 18, 3, 299-318.

Broadbent M. and Weill P. 1993. ‘Improving Business and Information Strategy Alignment: learning from the banking industry’. IBM Systems Journal, 32, 1, 162-179.

Ciborra C.U. 1997. ‘De profundis? Deconstructing the Concept of Strategic Alignment’. Scandinavian Journal

of Information Systems, 67-82.

Clark K.B. and Fujimoto T. 1987.‘Overlapping Problem Solving in Product Development’. Working Paper,

Harvard Business School.

Devaraj S; Fan M. and Kohli R. 2002. ‘Antecedents of B2C Channel Satisfaction and Preference: Validating E-Commerce Metrics’. Information Systems Research, 13, 3, 316-333.

Earl M. and Khan B. 2001. ‘E-commerce is Changing the Face of IT’. MIT Sloan Management Review, 64-72. Henderson J.C. and Venkatraman N. 1993. ‘Strategic Alignment: Leveraging Information Technology for

Transforming Organizations’. IBM Systems Journal, 32, 1, 4-16.

Ives B; Jarvenpaa S.L. and Mason R.O. 1993. ‘Global Business Drivers: Aligning Information Technology to Global Business Strategy’. IBM System Journal, 32, 1, 143-161.

Kalika M. 2000. ‘Le management est mort, vive le e-management!’. Revue Française de Gestion, 129, 68-74. Kulatilaka N. and Venkatraman N. 2001. ‘Strategic Options in the Digital Era’. Business Strategy Review, 12,4,

7-15.

Lederer A. and Burky L.B. 1989. ‘Understanding Top Management’s Objectives: A Management Information Systems Concern’. Journal of Information Systems, 49-66.

Limayem M. and Chabchoub N. 1999. ‘Les Facteurs influençant l’utilisation d’Internet dans les organisations’.

Systèmes d’Information et Management, 4, 1, 29-56.

Lind M.R. and Zmud R.W. 1991. ‘The Influence of Convergence in Understanding Between Technology Providers and Users in Information Technology Innovativeness’. Organization Science, 2, 2, May, 195-217. Luftman J.N. 1997. ‘Align in the Sand’. Computerworld Leadership Series, 3, 2, 1-11.

Malone T.W. 2001. ‘The Future of E-Business’. MIT Sloan Management Review, 104-104.

Mc Kinney V; Yoon K and Zahedi F. 2002. ‘The Measurement of Web-Customer Satisfaction: An Expectation and Disconfirmation Approach’. Information Systems Research, 13, 3, 296-315.

Monod, E. 2002. ‘Internet et performance de l’entreprise : Etude de l’organisation industrielle de 104 PME en Loire- Atlantique’. Proceedings of the Seventh AIM Conference, Hammamet, Tunisia.

Nickerson R. 2002. ‘An E-commerce System Model’. Proceedings of the Eight Americas Conference on

Information Systems, 310-316.

Palmer J.W. 2002. ‘Web Site Usability, Design, and Performance Metric’. Information Systems Research, 13, 2, 151-167.

Pillet J-L. and Rolle J-D. 2002. ‘Comment mesurer l’opportunité d’introduire le commerce électronique dans une entreprise’. Proceedings of the Seventh AIM Conference, Hammamet, Tunisia.

Porter M.E. 2001. ‘Strategy and the Internet’. Harvard Business Review, 63-78.

Raymond L; Rivard S. and Bergeron F. 2002. ‘Les déterminants de l’implémentation d’un site web dans une PME : le cas des agences de voyages’. Working paper, HEC Montreal.

Rayport J.F. and Sviokla J.J. 1995. ‘Exploiting the Virtual Value Chain’. Harvard Business Review, 75-85. Reich B.H. and Benbasat I. 1996. ‘Measuring the Linkage Between Business and Information Technology

Objectives’. Management Information Systems Quarterly, pp 55-81.

Reich B.H. and Benbasat I. 2000. ‘Factors that Influence the Social Dimension Of Alignment between Business and Information Technology Objectives’. Management Information Systems Quarterly, 81-113.

Rockart J.F; Earl M. and Roos J. 1996. ‘Eight Imperatives for the New IT Organization’. Sloan Management

Review, 43-56.

Ross J.W. and Beath C.M. 2002. ‘Beyond the Business Case: New Approach to IT Investment’. MIT Sloan

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Tjan A.K. 2001. ‘Finally, A Way to Put Your Internet Portfolio in Order’. Harvard Business Review, 76-95. Van Der Heijden H. 2001. ‘Measuring IT core capabilities for electronic commerce’. Journal of Information

Technology, 16, 13-22.

Van Der Zee J.T.M. and De Jong B. 1999. ‘Alignment Is Not Enough: Integrating Business and Information Technology Management with the Balanced Business Scorecard’. Journal of Management Information

Systems, 16, 2, 137-156.

Venkatraman N. 2000. ‘Five Steps to a Dot-Com Strategy: How To Find Your Footing on the Web’. MIT Sloan

Management Review, 15-22.

Vitale M. and Weill P. 2002. ‘What IT Infrastructure Capabilities are Needed to Implement E-business Models?’. MIS Quarterly Executive, 1, 1, 17-34.

Wheeler B.C. 2002. ‘NEBIC: A Dynamic Capabilities Theory for Assessing Net-Enablement’. Information

Systems Research, 13, 2, 125-146.

Zmud R.W. 1988. ‘Building Relationships Throughout the Corporate Entity’. In Transforming the IT

Organization: The Mission, the Framework, the Transition, Elam J; Ginzberg M; Keen P; Zmud R.W., ICIT PRESS, Washington,55-82.

Figure

Figure 2 – Proposition for the representation of E-business Alignment.
Table 2 – Selected variables for assessing e-business from literature about IS/IT alignment
Figure 3- E-business Alignment Model proposition

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